Cathy Pattillo, Assistant Director, Fiscal Affairs Department, has said that for many low‑income, developing countries, the pandemic has imposed a major setback in their plans to progress toward achieving the Sustainable Development Goals by 2030. For instance, gains in recent decades in reducing poverty could be reversed. Before COVID, the International Monetary Fund (IMF) she said had estimated that most low‑income countries needed significant additional financing, including from the private sector, to achieve the SDGs.
“Now, the pandemic is leaving most of these countries with higher spending needs and higher levels of debt. Debt vulnerabilities were rising in some countries even before the pandemic and now over half of low‑income countries, 54 percent, are either in debt distress or at high risk of debt distress” she said. Pattillo was responding to a question during the Fiscal Monitor Press Briefing, as the IMF estimations and the pandemic has caused 100 percent of external and internal debt, and how these levels are expected to erode the emerging markets and low‑income countries efforts to achieve the SDG agendas.
She answered that, this clearly makes the ambitious SDG timeline even more daunting. “So the poorest countries will clearly need support from the international community, concessional financing, debt relief, and this will help minimize the scarring effects of the pandemic and allow them to continue making progress toward the SDGs, especially to reduce poverty and hunger.” The Assistant Director said that it is worrisome that some countries who rightly are fighting COVID have then had to not spend as much on some routine health spending like vaccinations for childhood diseases.
“This could have long‑term consequences for people’s health and well‑being. So clearly support from the international community is needed. When the crisis subsides, these countries will also need to boost their own revenue capacity.” Now, according to the Fund, the official sector has stepped up with bilateral debt relief under the G‑20 and Paris Club Debt Service Initiative. Forty‑four of 73 eligible countries are benefiting from this initiative, which is estimated to have freed up about US$5 billion for countries in 2020 to cope with the health and economic impact of the crisis.
The Fund has provided debt relief, US$500 million to 29 of the poorest and most vulnerable countries through the Catastrophe Containment and Relief Trust, and also emergency financing to countries to allow them to cover COVID‑related expenditures. So the Fund has provided very rapid and sizable support in response to the crisis. US$15 and a half billion in the last six months, which is concessional for the low‑income countries in the region and also debt relief.
This support, she furthered has allowed financially constrained countries to cover support to people and firms who have been very hard hit from multiple shocks, from the health crisis, from the economic disruptions, from lower tourism receipts, lower export prices, capital inflows, and remittances. These countries had less fiscal space and had to adapt innovative ways to channel scarce resources to people in need.
Countries she noted have responded then with social safety nets, with cash transfers, with targeted spending to help hard‑hit firms. And “transparency and accountability” is key in this spending.
By Zainab Iyamide Joaque